The USD/MXN pair continued to trade below the 16.60 mark, aiming for a second consecutive session of losses on Monday. The Mexican Peso (MXN) showcased strength following an unexpected decline in the domestic Jobless Rate to 2.5%, hitting an eleven-month low and surpassing expectations of 2.8%. This favorable economic indicator has empowered the Bank of Mexico (Banxico) to uphold tight borrowing conditions as part of its strategy to combat persistent inflation.
Inflationary pressures persisted with headline and core measures rising to 0.27% and 0.33%, respectively, in the first half of March. Market participants are eagerly awaiting the release of Consumer Confidence data for March, scheduled for Thursday, to gauge further economic sentiment.
Meanwhile, the US Dollar Index (DXY) faced challenges amid lower US Treasury yields, hovering around 104.50. At present, the 2-year and 10-year yields on US bond coupons stand at 4.59% and 4.19%, respectively. The US Dollar (USD) encountered headwinds following dovish comments by Federal Reserve (Fed) Chairman Jerome Powell on Friday.
Chairman Powell’s remarks regarding the recent Personal Consumption Expenditures Price Index (PCE) data from the United States (US) meeting expectations reaffirmed the Fed’s stance on potential interest rate cuts for the year. Fed officials maintain projections of three rate cuts for the year, with market participants anticipating the first of these cuts to materialize at the June meeting.
Traders are likely to adopt a cautious stance ahead of the release of the ISM Manufacturing Purchasing Managers Index (PMI) data from the United States (US) scheduled for later in the North American session, as it could provide further insights into the economic landscape and impact currency movements.
